Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Z margins likely to fall under competitive pressure: analyst

Z Energy fuel margins likely to fall under competitive pressure, Deutsche report

May 9 (BusinessDesk) – Transport fuels distributor and retailer Z Energy’s success in raising margins on petrol and diesel sales is under pressure and are “likely to trend toward the industry’s lower net margin,” says Deutsche Bank analyst Grant Swanepoel in a research note on yesterday’s full year result from Z.

The Wellington-based company, which took over the refining, distribution and retail operations of Shell New Zealand in 2010 and listed on the NZX last year, reported earnings before interest, tax, depreciation and amortisation of $219 million for the year to March 31.

While that was ahead of last year’s prospectus forecast of $207 million, the apparent outperformance was “just a modest beat, or near top end of guidance”, once operational costs were adjusted for abnormal impacts, Swanepoel said.

Z reported fuel margins improved from 15.8 cents per litre to 17.1 cents per litre, ahead of a target 16.5 cents per litre, while accepting some loss of market share, which now sits 2 percent above where it was when Z was formed.

“Management indicated that it is now responding to the competitor discounting strategies, which it refers to as tactical discounting,” the Deutsche note says. “So far, while still early days, this has seen little change in competitive behaviour. A best outcome would be that competitors will stop the retail discounting.

“However, we expect that all it means is that Z’s margin at the pump will slowly trend toward the industry’s lower net margin.”

Deutsche maintained its ‘hold’ recommendation on Z, targeting a share price of between $4.08 and $4.11.

The company’s shares gained 1.8 percent to $3.90 in early trading on the NZX today, having initially fallen slightly to $3.87 after yesterday’s result announcement.

“The one metric that could cause a surprise on the upside over the 2015 financial year would be if the industry pushes the gross petrol margin, as reported by the Ministry of Business, Innovation and Employment, up another few cents per litre,” said Swanepoel’s note.

“We are forecasting just a 0.3 cents per litre rise over the year after a 2.6 cents per litre over the 2014 financial year.”

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Half A Billion Accounts: Yahoo Confirms Huge Data Breach

The account information may have included names, email addresses, telephone numbers, dates of birth, hashed passwords (the vast majority with bcrypt) and, in some cases, encrypted or unencrypted security questions and answers. More>>

Rural Branches: Westpac To Close 19 Branches, ANZ Looks At 7

Westpac confirms it will close nineteen branches across the country; ANZ closes its Ngaruawahia branch and is consulting on plans to close six more branches; The bank workers union says many of its members are nervous about their futures and asking ... More>>

Interest Rates: RBNZ's Wheeler Keeps OCR At 2%

Reserve Bank governor Graeme Wheeler kept the official cash rate at 2 percent and said more easing will be needed to get inflation back within the target band. More>>

ALSO:

Half Full: Fonterra Raises Forecast Payout As Global Supply Shrinks

Fonterra Cooperative Group, the dairy processor which will announce annual earnings tomorrow, hiked its forecast payout to farmers by 50 cents per kilogram of milk solids as global supply continues to decline, helping prop up dairy prices. More>>

ALSO:

Results:

Meat Trade: Silver Fern Farms Gets Green Light For Shanghai Maling Deal

The government has given the green light for China's Shanghai Maling Aquarius to acquire half of Silver Fern Farms, New Zealand's biggest meat company, with ministers satisfied it will deliver "substantial and identifiable benefit". More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news